Chapter 02 Identifying Competitive Advantages Multiple Choice Questions Which of the following is not a typical way that a company would duplicate a competitive advantage? A Acquiring the new technology B Copying the business operations C Hiring away key employees D Carrying large product inventories When a company is the first to market with a competitive advantage, this is called a first-mover advantage All of the following companies were first-movers except A FedEx-the online self-service software B Apple-iPad C Apple-iPod D Microsoft-Bing search engine A business strategy achieves a specific set of goals, which include A Developing new products or services and attracting new competition B Increasing costs and attracting new competition C Attracting new customers and developing new products or services D All of these Competitive intelligence is the process of gathering information about the competitive environment, including _ A Competitors' employees B Competitors' differentiated processes C Competitors' plans D All of these Which of the following is a tool a manager can use to analyze competitive intelligence and identify competitive advantages? A The three generic strategies B The threat of substitute buyer power C Differentiated costs D Supplier loyalty Identifying competitive advantages can be difficult and explains why they are typically _ A Temporary B Satisfactory C Terminated D Unsuccessful Updating business strategies is a continuous undertaking, as internal and external environments A Become less competitive B Remain stagnant C Rapidly change D Become more consistent Which of the following represents a reason why competitive advantages are typically temporary? A The competitor will hire away your key employees B The competitor quickly seeks ways to duplicate your business operations C The competitor will purchase new technology D All of these What is a competitive advantage? A A product that an organization's customers place a lesser value on than similar offerings from a competitor B A feature of a product or service on which customers place a lesser value than they on similar offerings from a supplier C A service that an organization's customers place a lesser value on than similar offerings from a supplier D A feature of a product or service on which customers place a greater value than they on similar offerings from competitors 10 All of the following are common tools used in industry to analyze and develop competitive advantages, except: A Five-Forces Model B Three Generic Strategies C Competitive analysis model D Value chain analysis 11 Greg Provenzo owns and runs a Blockbuster video store Greg is implementing a drive-thru rental process that is the same as you would find at a fast-food restaurant Customers can pick up and drop off their videos without leaving their cars Greg's new system has become so popular that Videos Plus, a competitor down the street, is attempting to re-create Greg's video drive-thru rental process Greg's system is an example of a _ A Supply chain power B First-mover advantage C Business processing strategy D Business Intelligence 12 The process of gathering information about the competitive environment, including competitors' plans, activities, and products, to improve a company's ability to succeed is the definition of _ A Feedback B Information C Competitive intelligence D Data 13 Steve Jobs and Apple created a big advantage in the technology industry with the introduction of the iPod, iPhone, and iPad What are these all examples of? A Competitive advantage B Competitive intelligence C First-mover advantage D All of these 14 Paula Logston is the owner and operator of a high-end online custom clothing company Paula has never heard of Porter's Five-Forces Model, and she wants to understand why she would perform an analysis using it If you were tasked with explaining Porter's Five-Forces Model to Paula, what would be the primary reason she would want to use this type of analysis? A To help Paula choose a clothing business focus B To help Paula evaluate the attractiveness of the clothing industry C To help Paula evaluate and execute business goals D All of these 15 A advantage features a product or service on which customers place a greater value than they on similar offerings from competitors A Competitive B Competitor C Power D First-mover 16 The Victory Wireless store in Denver is currently offering a fabulous marketing strategy for potential new iPhone customers Victory Wireless offers customers who purchase an iPhone with a two-year subscription a free Otter phone case, car charger, ear phones, and speakers In terms of Porter's Five Forces, what is Victory Wireless attempting to achieve with this marketing strategy? A Increase buyer power B Increase substitute products C Decrease supplier power D Decrease buyer power 17 Gina Brooks works for Aquarium Retail Services selling high-end saltwater fish and tank supplies Aquarium Retail Services is the current market leader in Gina's city Gina has recently been approached by Deep Blue Incorporated with an opportunity to run its corporate nationwide marketing and sales division Gina decides to jump at the opportunity! Deep Blue is attempting to gain a competitive by stealing its competitor's key employees A Power B Entry Barrier C Advantage D Loyalty 18 The banking industry has implemented several competitive advantages, including ATMs, online bill-pay services, and electronic statements Of course, these competitive advantages were quickly duplicated by any competitor that wanted to remain in the banking industry These were all examples of _ competitive advantages A acquiring new technology products and services B hiring new employees C reducing expenses D gaining invaluable feedback from customers 19 Michael Porter defined the Five-Forces Model and the potential pressures that can hurt sales Which of the following is not one of the potential pressures that can hurt sales? A Suppliers can drive down profits by charging more for supplies B New market entrants can steal potential investment capital C Substitute products can steal customers D All of these 20 Which of the following is included in Porter's Five-Forces Model? A Loyalty expenses B Supply chain management C The power of competitors D Systems thinking 21 Kevin Campbell is an incoming freshman at your college Kevin is frustrated by the cost of books, tuition, and expenses, and he also needs to purchase a rather expensive laptop In an effort to save money, Kevin begins a Facebook group finding other college students who need to purchase laptops Soon, Kevin's Facebook group has close to 100,000 students Kevin decides to collectively approach different computer companies to see if his group qualifies for a special discount What business strategy is Kevin using to purchase laptops? A Collecting business intelligence B Decreasing entry barriers C Purchasing a substitute product D Increasing buyer power 22 What are costs that make customers reluctant to switch to another product or service? A Support activities B Switching costs C Loyalty rewards D Value chain activities 90 Focused strategies concentrate on either cost leadership or _ Differentiation Focused strategies concentrate on either cost leadership or differentiation AACSB: Reflective Thinking AACSB: Technology Blooms: Remember Difficulty: Easy Learning Objective: 02-03 Compare Porter's three generic strategies Topic: The Three Generic Strategies 91 Porter suggests adopting only of the three generic strategies One AACSB: Reflective Thinking AACSB: Technology Blooms: Understand Difficulty: Medium Learning Objective: 02-03 Compare Porter's three generic strategies Topic: The Three Generic Strategies 92 A chain analysis views a firm as a series of business processes that each adds value to the product or service Value AACSB: Reflective Thinking AACSB: Technology Blooms: Remember Difficulty: Easy Learning Objective: 02-04 Demonstrate how a company can add value by using Porter's value chain analysis Topic: Value Chain Analysis 93 value activities are found at the bottom of the value chain These include business processes that acquire raw materials and manufacture, deliver, market, sell, and provide after-sales services Primary AACSB: Reflective Thinking AACSB: Technology Blooms: Remember Difficulty: Easy Learning Objective: 02-04 Demonstrate how a company can add value by using Porter's value chain analysis Topic: Value Chain Analysis 94 _ value activities are found along the top of the value chain and include business processes, such as firm infrastructure, human resource management, technology development, and procurement, that support the primary value activities Support AACSB: Reflective Thinking AACSB: Technology Blooms: Remember Difficulty: Easy Learning Objective: 02-04 Demonstrate how a company can add value by using Porter's value chain analysis Topic: Value Chain Analysis True / False Questions 95 Porter's Five-Forces Model outlines the process for a sales strategy FALSE Porter's Five-Forces Model analyzes the competitive forces within the environment in which a company operates to assess the potential for profitability in an industry AACSB: Reflective Thinking AACSB: Technology Blooms: Remember Difficulty: Easy Learning Objective: 02-02 Describe Porter's Five Forces Model and explain each of the five forces Topic: The Five-Forces Model 96 With the Five-Forces Model, companies should watch the forces in the market If the forces are strong, competition generally increases, and if the forces are weak, competition typically decreases TRUE With the Five-Forces Model, companies should watch the forces in the market If the forces are strong, competition generally increases, and if the forces are weak, competition typically decreases AACSB: Reflective Thinking AACSB: Technology Blooms: Understand Difficulty: Medium Learning Objective: 02-02 Describe Porter's Five Forces Model and explain each of the five forces Topic: The Five-Forces Model 97 A leadership plan that achieves a specific set of goals or objectives is a business strategy TRUE A leadership plan that achieves a specific set of goals or objectives AACSB: Reflective Thinking AACSB: Technology Blooms: Remember Difficulty: Easy Learning Objective: 02-01 Explain why competitive advantages are temporary Topic: Identifying Competitive Advantages 98 When a company is the first to market with a competitive advantage, it gains a particular benefit known as competitive intelligence FALSE When a company is the first to market with a competitive advantage, it gains a particular benefit known as a first-mover advantage AACSB: Reflective Thinking AACSB: Technology Blooms: Remember Difficulty: Easy Learning Objective: 02-01 Explain why competitive advantages are temporary Topic: Identifying Competitive Advantages 99 Over the past decade the United States has lost an estimated 2.4 million factory jobs to Nepal FALSE Over the past decade the United States has lost an estimated 2.4 million factory jobs to China AACSB: Reflective Thinking AACSB: Technology Blooms: Understand Difficulty: Medium Learning Objective: 02-01 Explain why competitive advantages are temporary Topic: Identifying Competitive Advantages 100 Two ways to reduce buyer power are through switching costs and loyalty programs TRUE Two ways to reduce buyer power are through switching costs and loyalty programs AACSB: Reflective Thinking AACSB: Technology Blooms: Understand Difficulty: Medium Learning Objective: 02-02 Describe Porter's Five Forces Model and explain each of the five forces Topic: The Five-Forces Model 101 Mark Peterson identified the Porter's Five-Forces Model, which analyzes the competitive forces within a business environment FALSE Michael Porter created the Porter's Five-Forces Model, which analyzes the competitive forces within a business environment AACSB: Reflective Thinking AACSB: Technology Blooms: Understand Difficulty: Medium Learning Objective: 02-02 Describe Porter's Five Forces Model and explain each of the five forces Topic: The Five-Forces Model 102 There are many challenges to changing doctors, including transferring medical records and losing the doctor-patient relationship along with the doctor's knowledge of the patient's history Changing doctors provides a great example of switching costs TRUE Switching costs are costs that make customers reluctant to switch to another product or service Switching costs include financial as well as intangible values AACSB: Reflective Thinking AACSB: Technology Blooms: Understand Difficulty: Medium Learning Objective: 02-02 Describe Porter's Five Forces Model and explain each of the five forces Topic: The Five-Forces Model 103 Supplier power is one of Porter's five forces, and it measures the suppliers' ability to influence the prices they charge for supplies (including materials, labor, and services) TRUE Supplier power is one of Porter's five forces It measures the suppliers' ability to influence the prices they charge for supplies (including materials, labor, and services) AACSB: Reflective Thinking AACSB: Technology Blooms: Remember Difficulty: Easy Learning Objective: 02-02 Describe Porter's Five Forces Model and explain each of the five forces Topic: The Five-Forces Model 104 Polaroid had a unique competitive advantage for many years until it forgot to observe competitive intelligence The firm went bankrupt when people began taking digital pictures Polaroid provides a great example of Porter's threat of new entrants FALSE This is an example of Porter's threat of substitute products or services AACSB: Reflective Thinking AACSB: Technology Blooms: Analyze Difficulty: Hard Learning Objective: 02-02 Describe Porter's Five Forces Model and explain each of the five forces Topic: The Five-Forces Model 105 Product differentiation occurs when a company develops unique differences in its products or services with the intent to influence demand TRUE Product differentiation occurs when a company develops unique differences in its products or services with the intent to influence demand AACSB: Reflective Thinking AACSB: Technology Blooms: Remember Difficulty: Easy Learning Objective: 02-02 Describe Porter's Five Forces Model and explain each of the five forces Topic: The Five-Forces Model 106 Buyer power is the ability of buyers to affect the price they must pay for an item TRUE Buyer power is the ability of buyers to affect the price they must pay for an item AACSB: Reflective Thinking AACSB: Technology Blooms: Remember Difficulty: Easy Learning Objective: 02-02 Describe Porter's Five Forces Model and explain each of the five forces Topic: The Five-Forces Model 107 Tiffany & Company competes in the marketplace by offering high-cost custom jewelry Tiffany & Company is following a broad market and cost leadership strategy FALSE Tiffany & Company is following a focused market with high cost differentiation strategy AACSB: Reflective Thinking AACSB: Technology Blooms: Analyze Difficulty: Hard Learning Objective: 02-03 Compare Porter's three generic strategies Topic: The Three Generic Strategies 108 Porter has identified three generic business strategies, including focused, broad cost leadership, and switching strategy FALSE Porter has identified three generic business strategies: (1) broad cost leadership, (2) broad differentiation, and (3) focused strategy AACSB: Reflective Thinking AACSB: Technology Blooms: Remember Difficulty: Easy Learning Objective: 02-03 Compare Porter's three generic strategies Topic: The Three Generic Strategies 109 According to Porter's three generic strategies, Walmart is following a business strategy that focuses on "broad market and low cost." TRUE An example of a business that uses the business strategy "broad market and low cost" is Walmart AACSB: Reflective Thinking AACSB: Technology Blooms: Understand Difficulty: Medium Learning Objective: 02-03 Compare Porter's three generic strategies Topic: The Three Generic Strategies 110 Value chain analysis views a firm as a series of business processes that each adds value to the product or service TRUE Value chain analysis views a firm as a series of business processes that each adds value to the product or service AACSB: Reflective Thinking AACSB: Technology Blooms: Remember Difficulty: Easy Learning Objective: 02-03 Compare Porter's three generic strategies Topic: Value Chain Analysis 111 A standardized set of activities that accomplish a specific task is called a supply chain component FALSE A standardized set of activities that accomplish a specific task is called a business process AACSB: Reflective Thinking AACSB: Technology Blooms: Remember Difficulty: Easy Learning Objective: 02-03 Compare Porter's three generic strategies Topic: Value Chain Analysis 112 The value chain will group a company's activities into two categories: primary value activities and support value activities TRUE The value chain will group a company's activities into two categories: primary value activities and support value activities AACSB: Reflective Thinking AACSB: Technology Blooms: Understand Difficulty: Medium Learning Objective: 02-03 Compare Porter's three generic strategies Topic: Value Chain Analysis Essay Questions 113 Explain why competitive advantages are temporary A competitive advantage is a feature of a product or service on which customers place a greater value than they on similar offerings from competitors Competitive advantages provide the same product or service either at a lower price or with additional value that can fetch premium prices Unfortunately, competitive advantages are typically temporary, because competitors often quickly seek ways to duplicate them In turn, organizations must develop a strategy based on a new competitive advantage Ways that companies duplicate competitive advantages include acquiring the new technology, copying business processes, and hiring away employees AACSB: Reflective Thinking AACSB: Technology Blooms: Analyze Difficulty: Hard Learning Objective: 02-01 Explain why competitive advantages are temporary Topic: Identifying Competitive Advantages 114 Describe Porter's Five-Forces Model and explain each of the five forces Porter's Five-Forces Model analyzes the competitive forces within the environment in which a company operates, to assess the potential for profitability in an industry Buyer power is the ability of buyers to affect the price they must pay for an item Supplier power is the suppliers' ability to influence the prices they charge for supplies (including materials, labor, and services) Threat of substitute products or services is high when there are many alternatives to a product or service and low when there are few alternatives from which to choose Threat of new entrants is high when it is easy for new competitors to enter a market and low when there are significant entry barriers to entering a market Rivalry among existing competitors is high when competition is fierce in a market and low when competition is more complacent AACSB: Reflective Thinking AACSB: Technology Blooms: Analyze Difficulty: Hard Learning Objective: 02-02 Describe Porter's Five Forces Model and explain each of the five forces Topic: The Five-Forces Model 115 Compare Porter's three generic strategies Organizations typically follow one of Porter's three generic strategies when entering a new market: (1) broad cost leadership, (2) broad differentiation, or (3) focused strategy Broad strategies reach a large market segment Focused strategies target a niche market Focused strategies concentrate on either cost leadership or differentiation AACSB: Reflective Thinking AACSB: Technology Blooms: Analyze Difficulty: Hard Learning Objective: 02-03 Compare Porter's three generic strategies Topic: The Three Generic Strategies 116 Demonstrate how a company can add value by using Porter's value chain analysis To identify competitive advantages, Michael Porter created value chain analysis, which views a firm as a series of business processes that each add value to the product or service The goal of value chain analysis is to identify processes in which the firm can add value for the customer and create a competitive advantage for itself, with a cost advantage or product differentiation The value chain groups a firm's activities into two categories-primary value activities and support value activities Primary value activities acquire raw materials and manufacture, deliver, market, sell, and provide after-sales services Support value activities, along the top of the value chain in the figure, include firm infrastructure, human resource management, technology development, and procurement Not surprisingly, these support the primary value activities AACSB: Reflective Thinking AACSB: Technology Blooms: Analyze Difficulty: Hard Learning Objective: 02-04 Demonstrate how a company can add value by using Porter's value chain analysis Topic: Value Chain Analysis ... that accomplishes a specific task? A Business strategy B Business outcome C Business process D Knowledge process 68 Which of the following analyzes a company's business processes and is useful for... Greg's system is an example of a _ A Supply chain power B First-mover advantage C Business processing strategy D Business Intelligence 12 The process of gathering information about the competitive... analysis? A To help Paula choose a clothing business focus B To help Paula evaluate the attractiveness of the clothing industry C To help Paula evaluate and execute business goals D All of these 15 A